“What ever happened to Gary Cooper?” is a theme carried throughout The Sopranos – a question that Tony keeps asking as observes the men he is surrounded by.
Lately, I have been asking myself a similar question as I survey the hedge fund landscape. I don’t know what happens after the screen goes dark at the end of Tony’s world, but I do know what is happening in the hedge fund community and, friends, it is not good.
Today, right now as 2008 gets started, every Tom, Dick, Harry and Sue Wall Streeter thinks that they can become a hedge fund manager. They think that because they buy expensive jeans, wear expensive shoes and may have made a few bucks that they know how to make money in the markets. They believe that without a doubt they can turn themselves into the next Soros, Steinhardt and Robertson combined.
Wall Street has become all about hedge funds. You can’t talk to anyone about anything to do with the market without the phrase “hedge fund manager” coming into the conversation. It’s a wild and wacky thing that we’re all experiencing. The fact is that most — and I do mean most — of the people who call themselves hedge fund managers at cocktail parties and while making investor pitches are full of BS. These people, to quote the great Gecko, “Don’t know preferred stock from livestock!”
It’s amazing to see these people in action. It used to be that they were relatively easy to pick out of the crowd. Today they are the crowd. They believe they really have nothing to lose in the only business in the world where you can invest so little and potentially make so much. That’s what the hedge fund world has become, and it’s scary, really scary.
You need more than a shoeshine, a smile and a couple of hundred thousand dollars of seed money to become a great hedge fund manager. You need to have a special chip in your head that allows you to process information in a way that makes money. There are very few in the grand scheme of things that have this kind of chip, not to mention the ability to act promptly on the information the chip serves up. Most so-called managers are just bit players glomming on to the hottest trend.
It’s spotting trends, not following them, that keeps winning hedge fund managers ahead of the pack. Right the followers seem to be everywhere and the spotters nowhere to be found.
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